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Defining hospital markets for antitrust enforcement: new approaches and their applicability to The Netherlands

Published online by Cambridge University Press:  01 January 2008

MARCO VARKEVISSER ,
CORY S. CAPPS  and
FREDERIK T. SCHUT
MARCO VARKEVISSER*
Affiliation:
Erasmus University Rotterdam
CORY S. CAPPS
Affiliation:
Bates White, LLC
FREDERIK T. SCHUT
Affiliation:
Erasmus University Rotterdam
*
*Corresponding author: M. Varkevisser, Institute of Health Policy and Management (iBMG) and Erasmus Competition and Regulation institute (ECRi), Erasmus University Rotterdam, Room L3-125, PO Box 1738, 3000 DR Rotterdam, The Netherlands. Tel: +31 (0)10 408 8950. Email: varkevisser@bmg.eur.nl.
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Abstract

Effective antitrust enforcement is of crucial importance for countries with a market-based health care system in which hospitals are expected to compete. Assessing hospital market power – a central issue to competition policy – is, however, complicated because the presence of third party payers and the general unobservability of prices make it difficult to apply the standard methods of market definition. Alternative, less formal methods historically employed in the hospital industry have proven inaccurate; these methods were even called inapplicable in a recent US court decision. In this paper, we discuss the strengths and weaknesses of several new approaches to defining hospital markets that are suggested in the recent economic literature. In particular, we discuss the applicability of the time-elasticity approach, competitor-share approach, and option-demand approach to the recently partly deregulated Dutch hospital market. We conclude that the appropriate approach depends crucially on how health insurers contract with hospitals and how patients select their hospital.

Type
Articles
Information
Health Economics, Policy and Law , Volume 3 , Issue 1 , January 2008 , pp. 7 - 29
Copyright
Copyright © Cambridge University Press 2008

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